VZCZCXRO8923
RR RUEHCHI RUEHDBU RUEHFK RUEHHM RUEHKSO RUEHLN RUEHNAG RUEHPB RUEHPOD
RUEHYG
DE RUEHVK #0041 0840515
ZNR UUUUU ZZH
R 250515Z MAR 09
FM AMCONSUL VLADIVOSTOK
TO RUEHC/SECSTATE WASHDC 1113
INFO RUEHXD/MOSCOW POLITICAL COLLECTIVE
RUEHZU/ASIAN PACIFIC ECONOMIC COOPERATION
RUEHVK/AMCONSUL VLADIVOSTOK 1215

UNCLAS VLADIVOSTOK 000041 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON ECIN PREL PGOV RS
SUBJECT: KAMCHATKA-ALASKA FLIGHTS CANCELLED FOR 2009 
 
¶1. Russian air carrier Vladivostok Avia has announced that it 
will not fly direct trans-Pacific flight service between 
Petropavlovsk-Kamchatskiy and Anchorage, Alaska this summer. 
The carrier operated the route for over two months in 2008 with 
13 flights between July 7 and September 15, apparently just 
breaking even for the year.  Flights were scheduled this year 
between July 21 and September 20, but low bookings have 
cancelled the flights.  The company hopes to reinstate the 
flights in 2010 depending on the economic situation in the 
region.  End summary. 
 
US-FAR EAST FLIGHTS IN THE 1990'S 
 
¶2. In the 1990s, there Russian and American air services linked 
the two countries.  The 1998 Russian financial crisis hurt 
business across the board and the flights were suspended.  The 
American carrier was extremely dissatisfied with the business 
arrangement when the flights were suspended.  Since then, air 
travel between the U.S. and the Far East has been possible only 
via Japan, Korea, China, or Moscow.  These flights are long and 
often overbooked. 
 
2008 FLIGHTS 
 
¶3. The start-up of direct passenger air travel was a 
long-awaited event, and seen as a harbinger of stronger business 
and cultural relations between the Russian Far East and the 
Western States of the U.S.  Weekly regular flights were launched 
in July 2008, though earlier the airline planned to start 
operating in April and to have two flights a week from 
Vladivostok to Anchorage and onward to Seattle. 
 
EXPECTATIONS NOT FULFILLED 
 
¶4. (SBU) Aleksander Alekseyev, Vladivostok Avia Public Affairs 
officer, told Econ FSN that the company completed 13 round-trip 
flights between July 7 and September 15, carrying 532 passengers 
from Anchorage to Petropavlovsk and 549 passengers back to 
Alaska, which was about 40 percent of expected flight 
efficiency.  Several flights had 8 to 15 passengers onboard. 
The average was 40 passengers in a Tupolev-154 craft with a 
passenger capacity of 145.  The company expected that the new 
route would be popular among vacationers not only from Russia 
but also from Japan, Korea, China, Singapore, Thailand, and 
other countries that lack direct air links to Alaska. 
Unfortunately, due to a weak advertising campaign and rather 
high airfare (45,000 rubles or about 1,600USD for a round-trip 
Vladivostok-Anchorage via Petropavlovsk-Kamchatskiy), 
Vladivostok Avia could not compete with other Asian Pacific air 
carriers, which operate transpacific flights to the U.S. 
 
¶5. Alekseyev explained the company's decision with the ongoing 
economic crisis, which is followed by steadily growing fuel 
prices, high currency exchange rates, problems with loans from 
local banks, and resulting higher airfare.  Alekseyev hopes that 
the carrier will reinstate the service in summer 2010.  All 
required permissions for the flights have reportedly been 
obtained from the U.S. Department of Transportation. 
 
AIRLINE CONSOLIDATION 
 
¶6. By the end of 2008, Vladivostok Avia remained the only large 
and sustainable air carrier in the Russian Far East.  In early 
2009, Russian President Dmitriy Medvedev passed a 52 per cent 
controlling stake of Vladavia, along with 100 per cent stakes of 
two other air carriers, Sakhalinskiye Aviatrassy and the now 
bankrupt Dalavia, to Rostehnologii headed by close Putin 
associate Sergey Chemezov.  The merger should be completed by 
May 1, 2009.  The Far East airlines will consolidate with 
Domodedovskie Avialinii, KrasAir and Samara of Western Russia 
into Air Union, a new alliance of air carriers, a potential 
rival to Aeroflot. 
 
¶7. It is not clear whether Vladavia will profit from the 
consolidation, but the reinstatement of trans-Pacific flights to 
the U.S. will depend on the new Air Union alliance and regional 
economic health on both sides of the ocean.  Anecdotally, 
hunters and fishermen from Alaska raved about the sportsmen 
opportunities in the Russian Far East.  There are quite a few 
bear trophies in Alaska now thanks to last year's flights. 
 
ARMBRUSTER